Do Recent Immigrants impose a Fiscal Burden?

Robert Vineberg in a recent editorial (“Fraser Institute’s immigration analysis is flawed,” May 26) challenged the validity of our analysis, which concluded that recent immigrants impose an annual fiscal burden of about $20 billion on Canadian taxpayers. He furthermore argues that this burden is offset by non-fiscal benefits brought by these immigrants.

Our analysis is based on the poor economic performance of immigrants who arrived since 1987, the year when the Conservative Government of Brian Mulroney started to increase the numbers of immigrants admitted, and kept increasing them through the subsequent 1990-1992 recession in sharp contrast to the previous tap-on, tap-off policy whereby the number of immigrants admitted was cut back during recessions.. Statistics Canada data on the poor economic performance of these immigrants are unambiguous and are not challenged by Vineberg.

Instead he referred to Statistics Canada data, which show that immigrants who arrived before the early 1980s quickly earned incomes equal to and eventually greater than the Canadian average. Vineberg suggests that these results are also applicable to recent immigrants. This extrapolation is a logically indefensible leap of faith, which invalidates his entire criticism of our results. In fact, his analysis strengthens our case for the need to reform the immigrant selection process that was adopted in the early 1980s.

Vineberg also argues that our study fails to consider the “broader picture”, which allegedly shows that immigrants bring other economic benefits. In fact, we have discussed these alleged benefits in our study and found them to be either non-existent or very small.

Consider first that some immigrant entrepreneurs hire Canadians. To argue that this act brings great benefits assumes that otherwise unemployment would be higher and wages would be lower. Unemployment rates are determined by many factors, but the presence of immigrant entrepreneurs is not an important one. Nor do immigrant entrepreneurs raise wages of Canadians since they pay just marginally enough more to hire them away from other employers.

Secondly, Vineberg suggests that immigrant domestics “free up Canadian-born parents to earn often extremely high salaries.” The fact is that in the absence of such immigrants, the parents would have to pay more for domestic help, which they can afford given their extremely high salaries. Instead, if they hire immigrants for domestic work, in effect they receive an indirect subsidy by taxpayers who pay for the fiscal burden caused by their employees – a process few would consider to be fair.

Thirdly, Vineberg argues that immigrants help lower the average cost of providing “national defence, running diplomatic missions abroad, maintaining inter-city transportation infrastructure and so on”. These government costs are a very small proportion of total government expenditures since the vast bulk involves health, education, pensions and social support. Moreover, costs that are fixed in the short run increase in the longer run as millions of immigrants begin to crowd roads, harbours and airports and require more municipal infrastructure and universities. The Pacific Gateway bridge- and road-building project in Vancouver costs several billion dollars and was necessitated to a considerable extent by the weekly addition of 250 cars driven by new immigrant families in the metropolitan area.

Fourth, Vineberg chides us for neglecting the humanitarian benefits that accrue to the 20,000 refugees admitted into Canada each year. In our report we mention explicitly that our proposal for immigration reform did not apply to refugee claimants whose admissibility would continue to be determined by international treaty obligations. (http://www.fraserinstitute.org/research-news/display.aspx?id=17546, p.25)

Fifth, Vineberg suggests that if our analysis were applied to primary and secondary education, it would imply that Canada should “outlaw families of two or more children so that Canadian parents do not receive more in benefits than they pay in taxes.” This argument is laughable. The average Canadian family pays enough taxes to cover the cost of educating their children. The problem is that recent immigrant families do not. Similarly, the parents and grandparents of immigrant families receive government benefits that they did not earn by taxes paid earlier in their lives, as did the parents and grandparents of other Canadians.

On one issue we agree with Vineberg. We need a “constructive debate on how Canada chooses its immigrants”. Unfortunately, there is nothing constructive in his contribution to that debate.